Monday, August 26, 2013

Bid
protests on federal government contracts filed with the Government
Accountability Office (GAO) have recently received increased congressional
scrutiny due to protests of high-profile awards and reports that the
number of protests is increasing. The delay of contract award or performance
triggered by a GAO protest, coupled with the increasing number of GAO protests, has
also prompted concerns about the potential impact of protests upon government
agency operations, especially in the Department of Defense.

There has been a significant shift in bid protest trends over the last five
years. From FY2001 to FY2008, total government procurement spending,
adjusted for inflation, increased at a faster rate (over 100%) than the
number of protests filed (35%). This trend reversed itself in FY2008: from FY2008-FY2012
total government spending, adjusted for inflation, decreased more than 10% while
total protests increased 45%. This data indicates that, when compared to the
rate of government spending, bid protests decreased from FY2001-FY2008,
and increased from FY2008-FY2012.

The rate at which GAO sustains protests has also seen a significant shift in
recent years. From FY2001-FY2008 GAO sustained protests in 22% of their
opinions; from FY2008-FY2012 that number dropped to 18%. This data
suggests that while companies are more likely to file a bid protest, they
are somewhat less likely to win a bid protest. According to one recent
analysis, in FY2010, there was less than a 1% chance that GAO would
sustain a protest and the protesting party would go on to win the
contract. However, this figure does not account for cases where the agency
took corrective action prior to GAO issuing an opinion. Taking into account
agency corrective action, one observer estimated a “protester has a 12%
chance of ultimately winning a contract award as a result of its protest.”

In addition to GAO sustaining a protest a contracting agency voluntarily acts
to correct the allegation charged in the protest. Many analysts consider
the increasing willingness of agencies to voluntarily take corrective
action as one of the most significant trends in bid protests. In many cases,
voluntary action by an agency could indicate that the agency believes a given
protest has merit. However, there may be instances when an agency takes
corrective action even when it believes the procurement was done properly
(e.g., meeting with the protesting party to clarify why the protester lost
the competition). The percentage of protesters obtaining relief—either through
a protest being sustained or through voluntary action taken by an agency—is
called the effectiveness rate. Over the last 5 fiscal years the
effectiveness rate has remained relatively stable, averaging 43%.

Companies file protests based on the belief that the government has made a
material error in the bidding process. When agencies do not adequately
debrief losing bidders, the losing companies may also file a protest to
determine why they lost the competition. A number of analysts have also suggested
that companies are increasingly likely to file protests when it is in their
business interest to do so, even when they do not believe there was an
error in the procurement process. The specter of a company filing a bid
protest can influence agency behavior. Fear of protests may motivate
agency officials to conduct more rigorous market research, hold a competition
instead of awarding a sole-source contract, or conduct more thorough and
fair competition. On the other hand, fear of a protest could also prompt
officials to try to structure a contract in a manner they deem less likely to
be protested, such as using lowest price technically acceptable award criteria instead
of a best-value competition.

DOD contracts are less likely to be protested than those of the rest of
government. From FY2008- FY2012, on average, DOD accounted for 70% of
government contract obligations but only 57% of protests filed against the
federal government. Protests against DOD are sustained at a lower rate
than the rest of government. From FY2008-FY2012, 2.6% of protests filed against
DOD were sustained by GAO, compared to 5.3% of protests filed against federal
civilian agencies. Protests against civilian agencies are also growing at
a faster rate than protests against DOD.

Date of Report: August 9, 2013
Number of Pages: 28Order Number: R40227Price: $29.95

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